A characteristic of monopolistic competition is that:
A) there are many large firms in the industry.
B) firms produce a homogeneous product.
C) there are few firms in the industry.
D) firms are price makers.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by many firms in the industry, but each firm produces a slightly differentiated product. This gives firms some degree of market power, allowing them to act as price makers rather than price takers. Therefore, D is the correct choice. A is incorrect because monopolistic competition typically involves many small, rather than large, firms. B is also incorrect because firms in monopolistic competition differentiate their products, meaning they are not producing a homogeneous product. C is incorrect because as mentioned earlier, there are many firms in monopolistic competition rather than few.

A Characteristic of Monopolistic Competition Is That